1. Field of the Invention
The present invention relates to installment loans and savings accounts. More particularly, the present invention relates to a hybrid installment loan/savings account.
2. Description of the Related Art
Many banks, savings and loans, loan companies and other types of financial institutions offer installment loans to customers. With a typical installment loan, the customer is loaned an amount of money, and must make periodic payments, typically monthly, until the balance (i.e., the loan amount plus interest) is paid in full. Often, if the customer is employed, automatic payroll deduction is used to deduct pay from the customer""s paycheck and apply the deducted pay into the loan account to pay off the balance. Once the balance is paid in full, any excess payment is returned to the customer, any automatic payroll deduction is stopped, the loan account is typically closed, and the relationship between the financial institution and the customer typically ends unless the loan is refinanced.
Moreover, many banks and savings and loans offer savings accounts where customers accrue a positive balance through deposits. Interest is payed on the positive balance. Typically, withdraws are allowed from a savings account, but withdraws in access of the balance are not allowed.
Further, some banks and savings and loans provide checking accounts which pay interest on positive balances. However, negative balances are strongly discouraged, and fixed penalty amounts are accessed for withdraws or checks that cause a negative balance to be incurred.
Therefore, installment loans, savings accounts and checking accounts each provide advantages and disadvantages. However, there is a need for a single type of account which provides various advantages of installment loans, savings accounts and checking accounts.
Accordingly, it is an object of the present to combine advantages of installment loans, savings accounts and checking accounts into a single type of account.
More specifically, it is an object of the present invention to provide a hybrid installment loan/savings account in which an amount of money is loaned to a customer, automatic payroll deduction is applied to pay off the loan but continues even after the loan is paid in full, interest is charged when the balance is negative, and interest is paid when the balance is positive. In this manner, a customer can use automatic payroll deduction to pay off the loan amount, and then continue the automatic payroll deduction to accrue savings while earning interest. This type of account is desirable for financial institutions as a way to maintain an ongoing, positive relationship with a customer even after an installment loan has been paid in full.
Additional objects and advantages of the invention will be set forth in part in the description which follows, and, in part, will be obvious from the description, or may be learned by practice of the invention.
Objects of the present invention are achieved by providing a method which includes (a) creating an account for an account holder, the account having a balance which can be positive or negative; (b) performing automatic payroll deduction to automatically deduct pay over time from the account holder and apply the deducted pay to the balance of the account, the automatic payroll deduction continuing irrespective of whether the balance is negative or positive; (c) when the balance is negative, charging interest on the balance to the account; and (d) when the balance is positive, paying interest on the balance to the account.
Objects of the present invention are further achieved by providing an apparatus which includes a financial account of an account holder, and a payroll deduction system. The financial account has a balance which can be positive or negative, interest being charged on the balance to the account when the balance is negative, and interest being paid on the balance to the account when the balance is positive. The payroll deduction system performs automatic payroll deduction to deduct pay over time from the account holder and apply the deducted pay to the balance of the account. The automatic payroll deduction continues irrespective of whether the balance is negative or positive.
Moreover, objects of the present invention are achieved by providing a method which includes (a) creating an account for an account holder; (b) paying an amount of money to the account holder, and charging the amount to the account so that the account has an initial negative balance; (c) performing automatic payroll deduction to automatically deduct pay over time from the account holder and apply the deducted pay to the account to pay off the negative balance over time, the automatic payroll deduction continuing as the balance turns positive to continue accruing a positive balance in the account via the automatic payroll deduction; (d) charging interest on the balance to the account when the balance is negative; and (e) paying interest on the balance to the account when the balance is positive.
Objects of the present invention are also achieved by providing an apparatus which includes a financial account of an account holder, and a payroll deduction system. An amount of money is paid to the account holder and charged to the account so that the account has an initial negative balance. The payroll deduction system performs automatic payroll deduction to automatically deduct pay over time from the account holder and apply the deducted pay to the account to pay off the negative balance over time. The automatic payroll deduction continues as the balance turns positive to continue accruing a positive balance in the account via the automatic payroll deduction. Interest is charged on the balance to the account when the balance is negative, and interest is payed on the balance to the account when the balance is positive.